Report Says Enron Used Shelters to Avoid Taxes

Enron Corp. manipulated the U.S. tax code so aggressively that from 1996 through 1999 it paid no federal income taxes, congressional investigators said Thursday, adding to official worries over corporate America’s abuse of tax shelters.

A 2,700-page report from the Joint Committee on Taxation said the former energy trading giant treated its tax department as a profit center and was helped in its dealings by prominent accounting firms, investment banks and lawyers.

“Instead of drilling for oil and gas, Enron was drilling the tax code, looking for ways to find more and more tax shelters,” Sen. John B. Breaux (D-La.) said at a public hearing where the report was presented.

The committee’s findings followed revelations last week that shelters used by officers at telecommunications group Sprint Corp. are under government scrutiny.

The Senate Permanent Subcommittee on Investigations last month called for a crackdown on so-called structured finance services sold by banks, accountants and lawyers to companies and individuals to help them save money and enhance profits.

“The day of reckoning has come, I think, for shelter promoters,” said Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, which requested the Enron report.

“We have to hunt them down, we have to shut them down and do whatever it takes to purge that cancer from our system,” Grassley said. He added that the committee would be guided by the study as it considered legislation to curb tax-shelter abuses.

Houston-based Enron profited from 12 large tax deals -- with code names such as Tanya, Steele, Condor, Tammy and Valhalla -- that saved it more than $2 billion from 1995 to 2001, the report said.

Many of these “structured transactions” involved offshore shell companies. Some, like one called Cochise, involved deducting the same tax loss twice, the report said.